J&J's DuPuy Unit Reaches $2.5 Bln Deal To Compensate Revision Surgery Patients

(RTTNews) - Health care giant Johnson & Johnson Co.'s (JNJ) medical-device unit DePuy Orthopaedics, Inc., announced Tuesday that it has reached a $2.5 billion settlement to compensate patients in the U.S. who were subject to a second surgery, known as revision surgery, to replace their recalled DePuy ASR Hip system.

More than 12,000 thousand lawsuits were filed by patients against DePuy in federal and state courts related to the recall of its hip-implant products. The lawsuits were filed by implantees who have suffered metallosis, premature device failure, and other serious complications allegedly caused by the metal-on-metal hip devices recalled in 2010.

"We are committed to the well-being of ASR patients, as demonstrated by the voluntary recall and the program providing support for recall-related care. The U.S. settlement program provides compensation for eligible patients without the delay and uncertainty of protracted litigation," said Andrew Ekdahl, Worldwide President, DePuy Synthes Joint Reconstruction.

The settlement was reached between DePuy and the court-appointed committee of lawyers representing about 8,000 ASR Hip System plaintiffs who had a revision surgery before August 31, 2013.

DePuy noted that the major portion of the payments related to the settlement are expected to be made during 2014 from currently available cash. It added that the settlement will not see it incurring any additional charge to its earnings as it is part of a previously accrued amount.

However, the company said plaintiffs who had a revision surgery after August 31, 2013 were being provided support through an existing Broadspire program. DePuy Orthopaedics engaged specialized claims-processing company Broadspire Services Inc. to assist ASR patients in the reimbursement process.

Broadspire will also address recall-related patient out-of-pocket expenses, such as co-pays, deductible expenses, lost wages and travel costs.

Meanwhile, the company could end up spending in excess of $4 billion totally to settle more than 12,000 lawsuits, including patients who haven't had a revision surgery and those outside the U.S., related to the recall. The proposed settlements are billed as the largest ever for a medical device.

DePuy is currently battling more than 10,000 lawsuits in the U.S. over the recall of its ASR Hip Resurfacing System and the ASR XL Acetabular System in 2010.

In August 2010, DePuy Orthopaedics issued a voluntary recall of its ASR XL Acetabular Hip System and DePuy ASR Hip Resurfacing System after receiving new, then-unpublished data from a joint replacement registry in the UK.

The data indicated that while many patients with the ASR Hip System were not experiencing any problems, a higher number of ASR patients than previously reported to DePuy needed a revision surgery.

The DePuy unit recalled 93,000 implants in 2010, including 37,000 in the U.S. The recall meant that ASR implantees had to undergo a revision surgery, which caused the patients a loss of time, money and a lot of pain. It is said to have already spent nearly $1 billion on testing and treatment costs related to the recall.

This is the second multi-billion dollar settlement reached this month after another Johnson & Johnson subsidiary Janssen Pharmaceuticals Inc. agreed on November 5 to a $2.2 billion global settlement, which is one of the largest health care fraud settlements in U.S. History, to resolve allegations of misbranding and filing false claims for its schizophrenia drug Risperdal under a criminal plea and civil settlement agreement.

JNJ closed Tuesday's regular trading session at $94.86, up $0.56 or 0.59% on a volume of 6.62 million shares.